Gleacher to sell ClearPoint Funding unit

Gleacher & Co. GLCH will sell its ClearPoint Funding Inc. mortgage lending division as the boutique investment bank continues to explore strategic options in the midst of difficult business conditions.

The firm beat expectations for third quarter results, reporting a loss of two cents a share on revenue of $43 million. Analysts polled by Thomson Reuters had expected a loss of four cents a share on revenue of $48 million.

Gleacher bought ClearPoint in January 2011, seeking to capitalize on a vacuum in the mortgage origination market and to create a steady flow of product for its mortgage trading business. But the division stumbled, unable to obtain approval from government-sponsored entities to sell loans to them.

"The commercial prospects for its mortgage origination activity have greatly diminished," Gleacher said Thursday. It estimates a loss of $1.5 million to $6 million as a result of the sale.

Gleacher continues to explore strategic options for the firm overall, which could result in a merger with another firm. People familiar with the matter said last month that the St. Louis brokerage firm Stifel Financial Corp. SF had expressed an interest. Stifel announced earlier this week it would acquire KBW Inc., a boutique firm focused on financial services, for $575 million.

Shares of Gleacher rose 6% Thursday, to 70 cents. They are down 58% year-to-date.

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-- Gleacher continues to review strategic options

-- CEO "pleased" with level of interest shown in firm

-- Mortgage and rates trading revenue rebounds from second quarter

(Updates with analyst comments, comments from the conference call and additional earnings details.)

Gleacher & Co.
GLCH, -0.40%
will sell its ClearPoint Funding Inc. mortgage-lending division as the boutique investment bank continues to explore strategic options in the midst of difficult business conditions.

The firm's third-quarter earnings exceeded expectations, but the top line came in short. Gleacher reported a loss of two cents a share on revenue of $43 million. Analysts polled by Thomson Reuters had expected a loss of four cents a share on revenue of $48 million.

Gleacher continues to explore options for the firm overall, which could result in a merger with another firm. People familiar with the matter said last month that the St. Louis brokerage firm Stifel Financial Corp.
SF, +0.13%
had expressed an interest. Stifel announced earlier this week it would acquire KBW Inc., a boutique firm focused on financial services, for $575 million.

On a conference call to discuss earnings Thursday, Gleacher's Chief Executive Thomas Hughes said "I'm very pleased" with the number of firms that have expressed interest in Gleacher.

Mr. Hughes announced a strategic review of the company in August, a little more than a year after he had begun restructuring the firm to focus on its fixed-income operations.

The firm's two biggest owners, the private-equity firm MatlinPatterson Global Advisors, with a 28% stake, and Eric Gleacher, with 12%, are increasing pressure on the firm to make a move, people familiar with the situation have said.

Mr. Hughes has had to rebuild large parts of the firm even as he casts aside less productive operations. Last year he shut down Gleacher's equity-trading division. Earlier this year, nearly 70 members of his mortgage and interest-rate trading desk left, and the firm has been recruiting fiercely to restaff that operation. It added another 27 traders and others to the desk in the third quarter and said it was "substantially rebuilt."

Gleacher bought ClearPoint in January 2011, seeking to capitalize on a vacuum in the mortgage-origination market and to create a steady flow of product for its mortgage-trading business. But the division stumbled, and the process for obtaining a license from government-sponsored entities to sell loans to them dragged on with no approval in sight.

"The commercial prospects for its mortgage-origination activity have greatly diminished," Mr. Gleacher said Thursday. It estimates a loss of $1.5 million to $6 million as a result of the sale.

Revenue from investment banking plunged to $1.5 million in the third quarter compared to $7 million last year, on a lackluster deal market. Revenue from trading fell to $8.9 million from $13.7 million last year but rebounded from $5.3 million in the second quarter.

David Trone, an analyst at JMP Securities, raised his fourth-quarter estimate on Gleacher to a loss of 1 cent a share from a loss of two cents a share, reflecting momentum in the brokerage business. In mortgage and rates trading, "the wave of new hires since April continue to ramp up productivity, which we believe should drive growth in revenue and pretax income in the coming quarters," Mr. Trone said.

Shares of Gleacher rose 6% Thursday, to 70 cents. They are down 58% year-to-date.

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